The silent revolution in energy efficiency

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Current debates about cutting energy consumption and carbon emissions often carry a strong undercurrent of asceticism.

There is an almost missionary zeal to save the planet by reverting to a simpler and more satisfying past when energy consumption was lower (or at least encourage other people to make necessary sacrifices).

But the post-war experience of the United States and other industrialized economies suggests it is possible to combine rising living standards with the same or lower energy use.

Berkeley Physics Professor Richard Muller has described the phenomenon as “comfortable conservation”, the idea that it is possible to curb greenhouse emissions without sacrificing quality of life.
Given correct price signals, the advanced economies have made huge advances in using energy more efficiently, with most of the gains coming in the 1970s and 1980s in response to the dramatic rise in real energy prices after the oil shocks.

If China and other emerging markets match these gains in future it would avoid a substantial part of the projected emissions increase.

Measuring efficiency changes over long periods of time is surprisingly difficult. Estimating energy use is straightforward. Output and consumption are harder, though, because the mix of both production and consumption changes too much over extended periods.

There is no agreed way to compare output and consumption today with the 1940s.

Most observers would concur that adjustments should be made for population increase and inflation to provide real per capita numbers. But constant-dollar GDP, chained-dollar GDP, and manufacturing production all have strengths and weaknesses as indicators of real output or consumption.

Nonetheless, on any measure, the United States has experienced a revolutionary improvement in energy efficiency since 1945.

ENERGY INTENSITY FALLS

The attached chartbook provides various indicators of U.S. energy consumption and efficiency between 1949 and 2008.

Total consumption from fossil fuels, nuclear, renewable sources and imported electricity tripled between 1949 and 2008, rising from 31 quadrillion British thermal units (BTUs) in 1949 to 99 quadrillion last year.

But over the same period real economic output rose seven-fold, from $1.9 trillion to roughly $13.5 trillion.

In 1949, households and businesses consumed around 16,500 BTUs of primary energy for every dollar of GDP (in 2008 prices). By 2008, energy intensity had fallen more than half to just 6,900 BTUs.

The oil shocks mark a clear break point in the series. Before the 1970s, the economy was actually becoming steadily more energy intensive, with per-dollar consumption rising from 16,500 BTUs in 1949 to a peak of 21,300 BTUs in 1969, mostly as a result of widespread electrification, the spread of appliances such as refrigerators, and mass car ownership.

But the oil shocks spurred an enormous conservation effort that saw energy intensity halve in just 15 years to 9600 BTUs per dollar in 1984.

Progress has continued, though more slowly, as the easy gains had already been achieved and the decline in real energy costs throughout the late 1980s and 1990s removed much of the urgency.

…BY ANY MEASUREMENT
Some observers will object that using constant-dollar GDP fails to account for substantial changes in both the mix of consumption (from merchandise to services, and between different types of product) and production (from manufacturing to services, and domestic production to imports, with energy intensive industries displaced offshore and replaced by imports).

For critics, the improvement is a mirage, caused by the hollowing out of the U.S. manufacturing base and its replacement by imported goods.

But running the same analysis with chained-dollar GDP (to take account of changing consumption patterns) and estimates of manufacturing output (to isolate the effect of offshoring) shows similar reductions in intensity.

In chained dollars, energy consumption per unit of GDP more than halved from 17,300 BTUs in 1949 to 7,500 BTUs in 2008. In terms of manufacturing production, energy consumption has fallen almost 60 percent per unit of output.
Using chained-dollar GDP or manufacturing indices tends to smooth the trend and remove the pronounced break in the 1970s.

Both series show bigger efficiency improvements during the 1950s and 1960s followed by smaller gains in the 1970s and 1980s.

But that is simply because the massive escalation of energy prices caused an enormous and very rapid shift in consumption and production patterns; the composition as well as the level of output is very sensitive to energy prices. The end result is the same.

Improvements in efficiency are even more dramatic if consumption is adjusted for population growth. Despite reductions in intensity, the total amount of energy used has continued to climb from 75 quadrillion BTUs in 1973 to 99 quads in 2008.

But almost all the gains can be explained by the continued growth in the U.S. population. More people naturally use more energy. If we adjust the increase in energy use (31 percent since 1973) for the rise in the resident population (44 percent) energy consumption per person has actually been flat or falling for the last 35 years.

HUGE EFFICIENCY SCOPE
They key point is that energy consumption does not have to rise linearly with economic output and living standards. Given the right price signals, and ongoing pressure to squeeze out efficiency improvements in a competitive market economy, U.S. households and firms have achieved enormous efficiency gains in the past 60 years. Even larger gains have been made in Japan and many European countries.

If energy prices rise high enough for long enough, either because of another price spike or as the result of carbon taxes or cap-and-trade programmes, usage will fall sharply.

While there is still scope for significant efficiency improvements in the advanced economies, the real prize lies in emerging markets.

If China, India and other developing countries can replicate the same efficiency trend, there is scope to raise their production and living standards significantly while mitigating the impact on energy consumption and greenhouse gas emissions.

The noticeable acceleration around the time of the oil shocks suggests price signals are absolutely crucial. Putting an appropriate price on emissions via a carbon tax or cap-and-trade programmes is therefore essential in the longer term.
But a practical first step, especially in many developing countries, would be to lift regulated, often loss-making rates for electricity and other fuels. While they have worthy social goals, most of the benefits flow to middle class households rather than the poor, and they do nothing to provide efficiency incentives.

In the absence of proper price signals, funding from the advanced industrial economies and technology transfer will only achieve limited improvements.

Only a rise in energy costs in the developing world will spur the roll out of more efficient appliances and vehicles essential to replicate the efficiency gains achieved in the United States and elsewhere, limiting future emissions increases.

Its true that we are more energy efficient as a people than we were in the past, but just because their are more of us doesn’t make it OK to increase our impact on the environment. We need still need to strive to reduce our consumption of resources and production of waste. who knows how many people will be here 30 years from now. Of course an Easter island syndrome style Earth would make a good reality show.

The planet’s natural mechanisms for maintaining a stable climate don’t give a rat’s behind about “efficiency.” As you’ve noted, total energy consumption (and thus carbon emissions) have tripled since 1949. That’s the only figure that matters. Now it has to be reduced back to below that 1949 level. The U.S. goal is to achieve something like an 80% reduction by 2050. Improvements in efficiency alone will never achieve that goal.

No one is talking about the fact that it will be impossible to come anywhere close to that goal while continuing to increase our population. The U.S. actually plans (not projects, but plans) to boost our population by nearly 50% by 2050. The U.S. plans to achieve that population growth primarily through maintaining today’s extremely high rate of immigration.

It’s difficult to take the president’s plan to cut carbon emissions seriously when he continues to import carbon emitters faster than we can improve efficiency.

Mr. Murphy has hit the nail on the head. Population growth cannot continue indefinitely, but it seems most politicians and policy makers are scared to death to talk about it. Even though it is mathematically certain that the earth can accomodate only a finite number of people, that part of the per capita consumption equation appears to be substantially off limits in climate, ecological, and sociological discussion. One is hard pressed to take such discussions seriously when they ignore the population “gorilla in the room” – and this is not just an American issue.

While it pleases me to hear that the US has increased it’s energy efficiency, there is still much that can be done. As can be seen from the plots of energy use per capita over time, most people don’t care about being energy efficient – they care about how much money they have to spend on energy. The recent spike in gas prices was a great example – this really got people thinking about their driving habits and likely helped eliminate some wasteful driving.

Two things can be done immediately to further reduce our energy use. First, we can establish a standard for energy use per household. If the household exceeds this standard we can slap a substantial tax on their electricity (or gas) bill. The taxes can be used to fund research in areas related to energy efficiency. Second, as hinted at by Pete_Murphy and John-B, we can control the human population by establishing a limit on the number of births. Energy use will always be an issue for society, but these two measures can greatly reduce our usage.

I believe the status quo is already untenable.
Forecasts of population growth and increases in standard of living clearly drive us to possible extinction and at the very least to strife and cataclysmic outcomes.
We are a slothful race whose stimulus for the large majority comes from painful consequences. Just read the article and some comments above.
The good news is that the potential solutions to the issue are already available, but, unless we get a price driven prod we wont change, nor will serious effort be put in to even more ingenious solutions. There will be endless gum thumping and second guessing.
How do we mobilise around a common purpose which, if ignored will hit all of us?
“Pay me now or pay me later” might be a rallying cry.
Lecourt

Survival of the species, is genetic humanoid behavior, and should not be underestimated!
I count on its being omnipotent, when compared to other human interests.

Dennis Earl Baker

103 – 66 Duncan avenue west

Penticton British Columbia V2A6Z3

Phone/Fax 778-476-3673

25/11/2009

The Copenhagen Diagnosis, 2009: Updating the world on the Latest Climate Science. Has again indicated urgency in action is imperative. Here’s my solution and immediate areas of impact.
dennisbaker2003@hotmail.com
RE : The solution to climate change.
( human excrement + nuclear waste = hydrogen )
The USA discharges Trillions of tons of sewage annually, sufficient quantity to sustain electrical generation requirements of the USA.
Redirecting existing sewage systems to containment facilities would be a considerable infrastructure modification project.
It is the intense radiation that causes the conversion of organic material into hydrogen, therefore what some would consider the most dangerous waste because of its radiation would be the best for this utilization.
I believe the combination of clean water and clean air, will increase the life expectancy of humans.
The four main areas of concern globally are energy, food,water and air!
The radiologic decomposing of organic materials generates Hydrogen
By using our sewage as a source of energy we also get clean air , clean water, and no ethanol use of food stocks. Eat food first, create energy after.
Simply replacing the fossil fuel powered electrical generating facilities with these plants, would reduce CO2 emissions, and CH4 emissions, to acceptable levels, globally.
This would require a completely new reactor facility capable of converting human waste into hydrogen and then burning the hydrogen to generate electricity on site.
This solution is sellable to citizens because of all the side issue solutions. I’ve been able to convince most simply with concept of using nuclear waste to a productive end.
Superbugs ( antibiotic resistant ) apparently are created in the waters sewage is discharged into, which is one more side issue solution.
Anything not converting into hydrogen will potentially be disposed of using Transmutation.
The water emitted from hydrogen burning will have uses in leaching heavy metals from other contaminated site clean ups.
I thank you for your consideration, please feel free to contact me anytime.
Dennis Baker

What a well written and insightful article. It is important to recognize that energy efficiency is a crucial part of any climate action plan, from the household level to international agreements. The experience of California provides another example of how energy efficiency initiatives in the 1970′s showed real and continuing gains in efficiency and cost savings, ostensibly without sacrificing standard or quality of living. The concept is now finally beginning to grow beyond Jimmy Carter’s donning a sweater in the whitehouse to become a cornerstone of our climate and energy future. It can be done!

The key point here is that we can and must change our current way of life, but that we can do so without changing the quality of life. We need to do so ASAP before the developing world makes the mistakes we did with our cities (automobile dependence, urban sprawl, environmental damage). Fortunately, there is an opportunity here to improve quality of life, while reducing environmental footprint if we focus on the right technologies and incentives, and are strong with vested interests that would hold the economy ransom rather than see such change.

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John joined Reuters in 2008 as one of its first financial columnists, specialising in commodities and energy. While his main focus is on oil markets, he has written broadly on the emergence of commodities as an asset class, regulatory issues and macroeconomic themes. Before joining Reuters, John spent seven years as a senior analyst for Sempra Commodities (now part of JP Morgan) covering base metals and crude oil. Previously, he worked as an analyst on world trade, banking and financial regulation for consultancy Oxford Analytica.